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Associated ship arrest – arbitration award obtained  to invoke indemnity under LOI – such award held to be a maritime claim justifying the arrest of an associated vessel

The facts

Hilane Ltd was the owner of the Sheng Mu.

It concluded a voyage charter party on the Gencon form with Phiniqia International Shipping LLC, for the carriage of a cargo of coking coal from Bandar Abbas, Iran, to Vizag, India.

The charter party contained the following clause:

‘Clause 38

Owners agree for charterers to issue 2nd set of bills of lading in Dubai against charterers’ simple LOI & charterers undertake to surrender the first set of original bills of lading issued at loadport to owners within   21 days. If required owners agree to issue bs/l showing loadport Middle East Port or Persian Gulf Port or Ras Al Khaimah instead of actual loadport Bandar Abbas.

. . .

Tradeline LLC, Phiniqia’s parent company, purchased the coking coal that was to be carried on the Sheng Mu from Golden Waves FZC.

The first set of bills of lading was issued showing Golden Waves as the shipper, the load port as ‘Persian Gulf Port’ and the notify parties as Tradeline and Fairway Trading Co (Pty) Ltd of Chennai, India.

The following day Tradeline, requested a second set of bills of lading to be issued showing the load port as Ras Al Khaimah in the United Arab Emirates and identifying Tradeline as the shipper with notify parties as Gupta Coal India Ltd and IDBI Bank Ltd, both of Nagpur, India.

Phiniqia executed an LOI in favour of Hilane indemnifying it in respect of any liability, loss, expenses or damage of whatsoever nature that Hilane might sustain by reason of having issued two sets of bills of lading in accordance with Phiniqia’s request.

At Vizag a second LOI was issued to cover owners for delivering without the production of any bills of lading at all.

Golden Waves who remained in possession of the first bill of lading caused the Sheng Mu to be arrested in Napier, New Zealand.

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